Julie's X-Ray Company paid 2.00 per share in common stock ...

[Jipu 123]

Julie's X-Ray Company paid 2.00 per share in common stock dividends last year. The company's policy is to allow its dividend to grow at 5 percent for 4 years and then the rate of growth changes to 3 percent per year from year five and on.
 
  What is the value of the stock if the required rate of return is 8 percent?

Question 2

In 1930, the highest paid player in major league baseball was Babe Ruth of the New York Yankees, with an annual salary of 80,000.
 
  In 2005, the highest paid player in major league baseball was Alex Rodriguez, also of the New York Yankees, with a salary of 25,000,000. What was the average annual rate of growth in the top baseball salary over this time period?
  A) 7.96
  B) 18.70
  C) 3.31
  D) 4.17

[leahchrapun]

Answer to Question 1

D5 = 2.43 (1 + 0.03 ) = 2.50
P2 =  = 36.81
Value of stock = 36.81 + 7.46 = 44.27

Answer to Question 2

Answer: A
Explanation: A) r = (FV/PV)1/n - 1 = (25,000,000/80,000)1/75 = 7.96
MODE = END
INPUT 75 ? -80,000 0 25,000,000
KEY N I/Y PV PMT FV
CPT 7.96